Oil Price Chart - WTI 25 Oct 2010

Daily crude oil prices on the WTI chart closed last week marginally below the 9 and 14 day moving averages which are now set to define the trend for daily oil prices moving forward and in the next few weeks we are likely to see a strong break out for the commodity aided and abetted by the slide in the US dollar which appears to have resumed following the G20 at the weekend.  From a technical perspective the last two or three weeks has seen oil prices consolidate in a relatively narrow range between $80 to the downside and $84 per barrel to the upside, and as such, are now creating a very similar technical picture to that of late August and early September.  On that occasion we saw the commodity form a pennant pattern before a strong breakout to the upside before daily crude oil prices were propelled dramatically higher.  From the technical set up which is now being created I expect the same pattern to be repeated once again as we create a second and subsequent pennant formation with the upper level around at the $84 per barrel region which will then provide the platform for a dynamic break higher which is likely to send daily crude oil prices through the interim resistance at $87.14 and thereafter on towards $100 per barrel in the next few months.  This morning’s bullish sentiment has largely been fuelled by dollar weakness as we now break above both the 9 and 14 day moving averages, and with the 40 day now crossing the 200 day on the daily oil chart this is adding a further layer of positive sentiment for crude oil.  In summary the short, medium and longer term outlook remains bullish for daily oil prices.